1997 (9) TMI 323 - AT - Central Excise

Summary

Issues:
- Denial of Modvat credit on waste material
- Interpretation of Rule 57D of Central Excise Rules, 1944
- Applicability of Rule 57F
- Entitlement to Modvat credit on plastic granules obtained after recycling waste

Analysis:

The judgment involves seven appeals arising from two orders, three filed by the Assessee and three by the Department, regarding the denial of Modvat credit on waste material. The Assessee's appeals challenge the denial of Modvat credit on granules obtained from recycling waste, arguing that granules are the finished product and not waste under Rule 57D. The Department's appeals contest the interpretation of Rule 57D and 57F, claiming that full credit should not be allowed for inputs used in recycling waste. The Assessee also challenges the finding that they are not entitled to Modvat credit on plastic granules obtained after recycling waste.

The appeals were heard together and disposed of jointly. The Assessee's representative argued that the waste arising during the manufacture of BOPP films should not result in the denial of Modvat credit, citing a previous Tribunal decision. The Tribunal upheld that credit on inputs in waste is covered by Rule 57D, regardless of the waste quantity, rejecting the Revenue's appeals. The Assessee's counsel emphasized that the waste being recycled into granules was known to the Tribunal and cited previous decisions supporting their case.

The Assessee's counsel further argued that Notification No. 53/88 exempted waste plastic, making Rule 57D applicable instead of Rule 57F(4). The Revenue contended that waste should be considered under Rule 57F(4) as it has market value, citing relevant case law. The Assessee countered that Rule 57D(1) applies to exempt waste, while Rule 57F(4) pertains to dutiable waste.

After considering submissions and relevant rules, the Tribunal clarified that waste cleared as exempt under Notification No. 53/88 falls under Rule 57D, not Rule 57F(4). Granules obtained from recycled waste used for further manufacture of BOPP films do not require Modvat credit reversal. However, granules cleared under the notification are not considered waste under Rule 57D(1), necessitating the reversal of Modvat credit on inputs in those granules.

In conclusion, the Tribunal modified the impugned orders, holding that Modvat credit reversal is not required for waste cleared as waste or granules used for further manufacturing, but it is necessary for inputs in granules cleared under Notification No. 53/88.